5 Key Factors Affecting Business Loan Interest Rate

Business Loan Interest Rate

If you have a business, you may need some amount of money from time to time to manage cash flow, working capital, business expansions and much more. A business owner does not need to liquidate assets and savings. It is because they can now apply for the business loan online. So, it would be right to know a few vital factors affecting Business Loan Interest Rate.

But many people still don’t apply for it, considering they have to manage higher Business Loan Interest Rates. On that note, it would be right to know a few vital factors affecting Business Loan Interest Rate. Read on and learn more!

The creditworthiness of the borrower 

Since the business loan is mostly unsecured; it means that the facility is given on the higher loan rates. Lenders do that to moderate their possible risk of defaults. Hence, the loan approval and the rate of interest depend on the creditworthiness of the applicant. The creditworthiness of the loan applicant is measured by CIBIL score. If an applicant has managed a credit score of 750 or more, he/she can get a lower rate of interest. One of the best ways to keep your CIBIL score higher is by paying your loan and other EMIs on time. 

The business financials 

Any lender in India may like to lend to an applicant with sound business fundamentals. Hence, if your business fundamentals are strong, then lenders may be sure of getting timely repayments. Also, a good profit-making business may enjoy lower Business Loan Interest Rate from top lenders. 

The business vintage 

One of the key factors affecting Business Loan Interest Rate is your business vintage. If you have managed a considerable time in the market, you may be an eligible loan candidate. On the other hand, a newbie may still need to prove that his/her firm is proficient enough for the loan approval. In this case, a firm with a longer vintage may enjoy lower Business Loan Interest Rate than the one that has just started.

Type of businesses 

Every business has a different model. Yes, some may be services-based, while some may be production-oriented. Hence, some business may come with a higher risk owing to many reasons. Thus, the final offering of the Business Loan Interest Rate may depend on the risk perception of the firm by lenders. This way, the rate of interest may differ, and the owner may have to deal with a higher or lower rate of interest. 

Future prospects for growth

The most immediate usage of the business loan is to better the condition of the firm. If the business is able to showcase great future growth prospects via its models, a lender may offer reduced Business Loan Interest Rate. The final Business Loan Interest Rate may also depend on the ability of the promoter to steer the firm towards growth and plans. All such factors may form the base on which the Business Loan Interest Rate are given. 

Now that you are aware of the factors affecting Business Loan Interest Rate, you should meet the lenders’ eligibility conditions.  The required eligibility parameters, along with business loan documents, are enlisted on lender’s websites. 

In the online market, you may be confused about selecting the best business loan because of so many choices. The best thing would be to compare all available offers on a third-party website and pick an offer matching your needs and budget the best.  

Bajaj Finserv offers pre-approved offers on business loans, personal loans, home loans, EMI Network and more. Its purpose is to simplify the loan processing. You can check out your pre-approved loan offers today after sharing your basic details such as your name and mobile number.      


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